Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

The market based out early today and recovered into the close as bargain hunting finally stepped into some of these beaten down UK exposures. A range of +/-74pts. 5051 low, 5125 high and a close at 5103; down -33pts or -0.66%...which actually seems like a win.

Here’s a look at a few of the UK exposures which have been the HIT hardest….but are now starting to see some life from the lows…CSL probably a bit of a stretch to be included in this table, however, they do have some earnings in the region and they reside in the Market Matters portfolio. HGG and CYB had the biggest post BREXIT fall…CYB leading the recovery at this stage – still a reasonable bounce from HGG.

We discussed CYB in this morning’s note, calling $4 as a key level of support. There are 2 issues around this stock as we see it. It’s 90% deposit funded, meaning that customers fund them, then they source the remainder from wholesale debt markets. That’s a good way to go, however, it’s important to keep customers (depositors) comfortable with your credit worthiness. Last night, various rating agencies downgraded the UKs credit rating putting them on negative watch. If, and this is a BIG if, CYB suffer a similar fate, and have their credit downgraded on the back of BREXIT, this could reduce that level of comfort – and depositors could up and leave, giving CYB a funding gab. Something to be conscious of.

Elsewhere, Macquarie (MQG) finished higher today – up +1.36% in a weak market. As discussed in the morning note today, MQG has been hit hard based on their European exposure – which is warranted to some extent, but not the magnitude that we’ve seen. MQG is in our portfolio.

On the flip side, Telstra (TLS) hit a high of $5.56 today yet saw BIG selling into the afternoon. TLS loves risk off, volatility etc and is the obvious place to hide. A big reversal from the lows from MQG and a big reversal from the highs for TLS is a fairly telling story today. Potentially some risk appetite returning we think…

Sectors Today

Source; Bloomberg


ASX 200 Movers

What Matters Overseas

The 2000 level tested last night on the S&P 500 – and FUTURES are now pricing a HIGHER open tonight. We’re looking for a bounce from here…

Ditto for the FTSE 100 – FUTURES pointing up more than 1%

Regards,
The Market Matters Team
28-34 O'Connell St
Sydney, NSW 2000


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